2015 (1) TMI 1253 - AT - Customs

Over-valuation of FOB thereof to make undue claim of DEPB - export of watch - whether customs has jurisdiction to question FOB value declared in respect of export of past and live consignments and such declarations whether were correct or liable to be reduced by Customs. - whether cost construction method followed by Revenue to determine FOB value of the exports is proper or the method of valuation prescribed by Valuation Rules of 1988. Held that - FOB of the watches covered by past and live consignments were overvalued on the grounds hereinafter dealt elaborately. Only one-tenth of such values were declared to Dubai and Hong Kong Customs which remained unrebutted. -Revenue discharged its burden of proof making allegation of mis-declaration relying on evidence gathered from abroad and also basing on various other contributory factors as well as on the basis of remittance came from Hong Kong to Dubai and reduction of declared value before Hong Kong Customs upon detection by them. Added to that, claim of use of gold in making watch components received low weightage by test results of the Government recognized laboratory. Contention of Revenue as to mis-declaration of FOB was established when the appellant M/s. Roche Watches changed its stand on cost of manufacture of watches filing three cost statement on three different dates, i.e., on 31-8-2004, 10-9-2004 and 24-9-2004. Repeated revision of such statements gives rise to the inference that the records of the appellants were not reliable and certificate issued by the Chartered Accountant was false. Misdeclaration of the value of export to Indian Customs was patent from remittance of lower consideration in respect of the goods exported by the appellant M/s. Roche Watches to Dubai and such goods exported therefrom to Hong Kong which remained unrebutted leading cogent evidence to the contrary by appellant. Therefore, even such factor contributes to the inference that higher export value came to India while the past export goods did not command such higher value corroborated by appellant s own conduct of declaration of lower value upon detection by Hong Kong Customs. Extended period of limitation - A case of overvaluation should not be sanctioned on the plea of time bar. Therefore, such a plea is rejected. It was also the contention of the appellant that there cannot be market enquiry beyond certain period prescribed by the Board s circular. Present case is a case where value of the export is to be determined in accordance with Valuation Rules, 1988 and that has been directed by this order to be carried. Misdeclaration of the value established - matter remanded back for the aspect of determination of valuation - Decided against the appellants.

Issues Involved:
1. Jurisdiction of Customs Authorities to question FOB value.
2. Validity of cost construction method for determining FOB value.
3. Admissibility of market enquiry reports and overseas enquiry reports.
4. Difference between FOB and PMV.
5. Time-barred adjudication.
6. Penalty and confiscation aspects.

Detailed Analysis:

1. Jurisdiction of Customs Authorities to Question FOB Value:
The Customs Authorities have jurisdiction to assess the value of goods meant for export under Sections 2(2), 14, 50, and 51 of the Customs Act, 1962. The term "assessment" includes determining the value of goods, which is essential for issuing a "let export" order. The Supreme Court in Om Prakash Bhatia v. CC, Delhi held that the exporter must disclose the true export value of goods, and the customs authorities can assess this value even if no duty is leviable. The value of export is determined under Section 14, which is applicable irrespective of duty liability.

2. Validity of Cost Construction Method for Determining FOB Value:
The Supreme Court in Siddachalam Exports Pvt. Ltd. v. Commissioner of C. Ex., Delhi held that the procedure prescribed under Section 14(1) and Rule 4 of the 1988 Valuation Rules must be adopted to determine the value of goods entered for export. The initial burden to establish that the value mentioned by the exporter is incorrect lies on the Revenue. Once the transaction value is rejected, the value must be determined sequentially through Rules 5 to 8 of the 1988 Rules.

3. Admissibility of Market Enquiry Reports and Overseas Enquiry Reports:
Market enquiry reports and overseas enquiry reports are admissible if conducted as a last resort when data of contemporaneous exports of identical goods is unavailable. The Supreme Court in Siddachalam Exports emphasized that market enquiry could be conducted only as a last resort. The Tribunal found that the market enquiry conducted by Revenue was questionable and directed a revaluation of exports following the procedure laid down in Siddachalam Exports.

4. Difference Between FOB and PMV:
FOB (Free On Board) and PMV (Present Market Value) are different concepts. The exporter is required to disclose the true export value (FOB) of goods, which includes the price paid or payable for the goods. The Supreme Court in Om Prakash Bhatia clarified that the exporter is not concerned with the PMV in India but must disclose the true export value.

5. Time-Barred Adjudication:
The Tribunal rejected the plea of time-barred adjudication, stating that there is no specific time limit prescribed in law for determining FOB for grant of DEPB. The adjudication was completed within a reasonable period, and the plea of time-bar was not accepted.

6. Penalty and Confiscation Aspects:
The Tribunal remanded the matter for revaluation of exports, making it premature to decide on the penalties. If the adjudicating authority finds any person or concern liable to penalty, appropriate orders may be passed after granting a fair hearing. Regarding confiscation, the Tribunal noted that goods exported and not covered by bond or guarantee are not confiscable. The adjudicating authority must examine the applicability of Section 113 of the Customs Act, 1962, and make a reasoned decision on confiscation.

Conclusion:
The Tribunal remanded the matter to the original authority for revaluation of exports, directing the authority to follow the procedure laid down in Siddachalam Exports and provide a fair hearing to the appellants. The miscellaneous applications filed by the appellants were disposed of accordingly.

← Previous Next →